Spain

Over the past year, the following significant reforms have been made to Spanish law on direct taxation of individuals:

Royal Decree- Law 4/2024

Royal Decree-Law 4/2024, which extends certain measures to address the economic and social consequences of the conflicts in Ukraine and the Middle East, and by which urgent tax, energy and social measures are adopted, was passed on 26 June and published in the Spanish Official Gazette on 27 June 2024. The main tax measures included that affect individuals’ taxation are the following:

•  The tax incentives established in the Municipal Real Estate Tax and the Business Activity Tax for the Island of La Palma are extended during 2024.
• The threshold to file PIT returns for taxpayers who obtain employment income from more than one payer if the amounts obtained through the second and subsequent payers exceed EUR 1,500 is increased from EUR 15,000 to EUR 15,876 with effect as from 1 January 2024.
• The reduction applicable to employment income when it does not exceed EUR 19,747.50 and the taxpayer does not obtain other non-exempt income over EUR 6,500 is also increased.
• The tax credit for the obtention of income in Ceuta and Melilla will also be applicable to PIT taxpayers who are resident for tax purposes in the Island of la Palma in tax period 2024.

The CIT free depreciation incentive provided for investments in new vehicles and new charging infrastructures for electric vehicles used for business purposes that come into operation in the tax periods starting in 2024 will also be applicable to PIT taxpayers that carry out the economic activities in which the vehicles and charging infrastructures are used. When such vehicles or charging infrastructures are transferred, the tax depreciation that exceeds that which would have been applicable had the free depreciation incentive not been applied will not reduce the acquisition value for the purposes of calculating the capital gain or loss arising from such transfer. This excess will be considered business income obtained in the tax period in which the assets are transferred.

Royal Decree 142/2024

Royal Decree 142/2024, dated 6 February, amends the Regulation of  Personal Income Tax, approved by Royal Decree 439/2007, dated 30 March, regarding withholdings and payments on account.

To prevent workers receiving the minimum interprofessional wage from being subject to withholdings or payments on account, paragraph 1 of Article 81 of the Personal Income Tax Regulation is amended, indicating the new amounts of employment income to which withholdings and payments on account are applied, based on the number of children and other dependents and the taxpayer's situation.

The Royal Decree raises the minimum amount to apply withholdings from EUR 15,000 to EUR 15,876, which will allow those who earn the minimum wage in 2024 to not have Personal income tax withholdings applied to their payroll.

This modification aims to exempt the minimum interprofessional wage from withholdings, in addition, salaries close to the minimum interprofessional wage will also see a reduction in the applicable withholding.

Royal Decree-Law 8/2023

Royal Decree-Law 8/2023 was enacted on 29 December 2023, bringing in measures to respond to the economic and social consequences of the war in Ukraine and the Middle East, and to mitigate the effects of drought. The most important measures contained in this legislation that affect individual taxation are:

• The limits for the application of the objective estimation method are extended for tax year 2024.
• The personal income tax (PIT) deduction for energy efficiency improvement work in housing is extended. The duration of this measure is extended until 31 December 2024, allowing the deduction of part of the work carried out by the taxpayer. The maximum tax base of this measure is 5,000 or 7,500 euros (EUR) per year, and it will be applicable if certain requirements are met.
• The minimum exemption for solidarity tax purposes is set at EUR 700,000.
• The 0% value-added tax (VAT) rate applicable to basic food products and the 5% VAT rate on olive and seed oils, as well as pasta, are extended until 30 June 2024.
• Progressive increase in the electricity tax rate from 1 January 2024 to 31 March 2024 to 2.5%, increasing to 3.8% from 1 April 2024 to 30 June 2024. This measure brings to an end the exceptional measure in effect from 26 September 2023 to 31 December  2023, by virtue of which the tax rate was set at 5%.
• Establishment of a VAT rate of 10% on international traffic of electric power and natural gas, inter alia.
• The possibility is also introduced of requiring taxpayers to submit PIT, wealth tax, and solidarity tax returns by electronic means.

Royal Decree 1008/2023

Royal Decree 1008/2023, which was enacted on 5 December 2023, establishes certain changes regarding PIT, such as regulations on benefits in kind, the maternity deduction, the threshold for the obligation to submit PIT return, and the regulation of the impatriate special tax regime, among others. The most important measures contained in this legislation that affect individual taxation are:

• The threshold requiring the employee to submit a PIT return if one’s salaries are paid by more than one employer (among other cases) increases from EUR 14,000 to EUR 15,000.
• Regarding the maternity deduction, the Royal Decree envisages the application of this deduction by women with children under three years old who are unemployed or registered under the corresponding social security regime.
• Detailed development of the content of the regime for taxpayers who apply the impatriate tax regime as a consequence of the conduct of an economic activity. Also, development of the requirements to be met by the family members moving to Spain together with the main taxpayer.